PoliticalChatter

Oh Fannie and Freddie (F and F) what have you done to us? About a month ago I declared the
United States government should in fact, let them die. The reason is simple, they are the main driving force behind the financial meltdown, one that is only being patched not fixed.  

The creation of Fannie and Freddie (F and F) was done so in the name of doing what’s right. Their purpose was to finance mortgages to those applicants that would have otherwise been rejected; in essence it was mortgage welfare. It was another nobell cause that never did and was never intended to meet its proclaimed purpose.  

Banks around the nation soon realized that F and F was the golden goose. Loan officers were coming down with carpel tunnel, hitting the approval stamp so often. The reason is that these banks would accept questionable borrowers and loans beyond the borrowers’ means by the thousands, buddle them up and sell them to F and F. It was the perfect storm, they handed out the cheap money created by the Federal Reserve, built up the loans and sold them for profit to the F and F or more pointedly the
United States government.  

The problem is clear; the government was subsidizing reckless, poor financial decisions for banks around the nation. For F and F they were continuing to swallow up loans that were at risk of defaulting, making the worthless and putting the institutions are peril, but that was never a worry, because it was the government not a business.  

That is exactly what happened when the Federal Reserve was forced to raise interest rates. Those on a variable rate were caught in a loan they could not pay back with the high rates. The defaults starting rolling in and banks were stuck, especially F and F. As more houses flooded the market the value dropped, leaving banks with defaulted loans and houses were the mortgage payoff far exceeded the value of the house. They had no way of recouping the money and therefore fell rapidly into the red.  

It was a destructive pattern, one that politicians not only allowed, but fueled with the creation of F and F. Millions of dollars in loans were handed out, without consequence because the banks knew they had a buyer for the mortgages Fannie and Freddie. Back in 2003 the Bush administration attempted to establish a committee to oversee the operations of F and F but it was killed off. Even with all the warning signs, F and F was left to roll along, because those in power of regulating and their friends were benefiting the most. One of those was Freddy and Fannie CEO Franklin Raines, who collected millions of dollars and below market loans. He was also the former White House Budget Director under Bill Clinton, shocking.  

Now with the bail out of Freddie and Fannie and other financial institutions, the government is proclaiming that everyone has been saved. Who has been saved? Was it the average American taxpayer and those who took a standard loan and built a house within their means? The answer is no, they are the ones paying the bill, while the politicians, bankers and lobbyist have their money and are facing no consequences for their reckless actions.

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